Despite ending fiscal 2015 on an upbeat note, shares of Deckers Outdoor Corp. DECK tumbled 4.3% last Friday. Although this designer, producer and brand manager of footwear and accessories posted better-than-expected fourth-quarter results, its subdued outlook for the first quarter of fiscal 2016 made investors wary.
The company delivered earnings of 4 cents a share in the final quarter of fiscal 2015 that fared better than the Zacks Consensus Estimate of a breakeven as well as a loss of 8 cents in the year-ago quarter. The better-than-expected bottom-line performance was backed by higher net sales, partially offset by subdued gross margin.
Net sales grew 15.6% and also came ahead of analysts’ expectations. Sales trends remained sturdy across the Direct-to-Consumer division, while Omni-Channel initiatives boosted consumer experience.
However, management’s projection of a wider loss in the first quarter compared with analysts’ expectations and the year-ago quarter figure, makes us cautious on the stock. Deckers now projects loss per share of about $1.52 on both a constant currency and reported basis compared with loss per share of $1.07 in the year-ago period. For the first quarter, the company envisions revenue to increase marginally on a constant currency basis, but expects it to remain flat on a reported basis.
The dismal outlook triggered a downtrend in the Zacks Consensus Estimate to $5.07 and $5.57 per share for fiscal 2016 and fiscal 2017, down 0.8% and 3.3%, respectively, over the past 7 days. For the first quarter of fiscal 2016, the Zacks Consensus Estimate of a loss of $1.36 increased by 19 cents over the same time frame.
Deckers currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the retail sector include Boot Barn Holdings, Inc. BOOT, Nike, Inc. NKE and Carter's, Inc. CRI, all carrying a Zacks Rank #2 (Buy).
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